Auditor Report of Sutlej Textiles & Industries Ltd.

Mar 31, 2018

Report on the Audit of the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Sutlej Textiles and Industries Limited ("the Company"), which comprise the Balance Sheet as at 31 March 2018, the Statement of Profit and Loss, the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs, profit/loss and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We are also responsible to conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor''s report. However, future events or conditions may cause an entity to cease to continue as a going concern.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31 March 2018, its profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

Other Matter

The comparative financial information of the company for the year ended 31 March 2017 prepared in accordance with Ind AS included in these standalone Ind AS financial statements have been audited by the predecessor auditor. The report of the predecessor auditor on the comparative financial information dated 18 May 2017 expressed an unmodified opinion.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31 March 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2018 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".

g) With respect to the other matters to be included in

the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements-Refer note 40 to the standalone Ind AS financial statements.

ii. The Company did not have any long-term contracts including derivative contract for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Company.

iv. The disclosures in the financial statements regarding holdings as well as dealings in specified bank notes during the period from 8 November 2016 to 30 December 2016 have not been made since, they do not pertain to the financial year ended 31 March 2018. However, amounts as appearing in the audited financial statements for the year ended 31 March 2017 have been disclosed-refer note 51 to the Ind AS financial statements.

Annexure A referred to in our Independent Auditor''s Report to the Members of Sutlej Textiles and Industries Limited on the Standalone Ind AS financial statements for the year ended 31 March 2018

(i) (a) According to the information and explanations given to us, the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets (property, plant and equipment and intangible assets).

(b) According to the information and explanations given to us, the Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In accordance with this program, certain fixed assets were verified during the year. In our opinion, the periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were observed on such verification.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deed of the immovable property is held in the name of the Company except for the below assets for which registration is pending and are currently held in the name of the respective units :-

(RS, in Crore)

Particulars	Gross block as at 31 March 2018	Net block as at 31 March 2018
Leasehold land at Jammu (Jammu & Kashmir)	2.92	2.58
Freehold land at Baddi (Himachal Pradesh)	0.08	0.08

(ii) According to the information and explanations given to us, the inventories, except goods-in-transit, has been physically verified by the management. For goods-in transit, all materials were substantially received/ delivered until the date of issuance of the report. In our opinion, the frequency of verification is reasonable. Further, as informed, the discrepancies noticed on verification between the physical inventory and the books records were not material.

(iii) According to information and explanation to us, the Company, during the earlier periods, had granted unsecured loan to a Company covered in the register maintained under section 189 of the Companies Act, 2013. Further, according to information and explanation to us:

a) the terms and conditions of the grant of such loan are not prejudicial to the Company''s interest.

b) the repayment of the principal and payment of interest amount is as stipulated and has been regular.

c) there is no overdue for more than ninety days.

The Company has not granted any loan to firms, limited liability partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013.

(iv) The Company has complied with provisions of section 186 of the Companies Act, 2013 in respect of loans granted and investments made. According to information and explanations given by the management, no loan or guarantee or security under section 185 and no guarantee and security under section 186 of the Companies Act, 2013 have been given during the year.

(v) According to the information and explanations given to us, the Company has not accepted any deposits as mentioned in the directives issued by the Reserve Bank of India and the provisions of Section 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

(vi) We have broadly reviewed the books of account maintained by the Company as specified under section 148(1) of the Act, for maintenance of cost records in respect of products manufactured by the Company, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of cost records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-tax, Sales-tax, Goods and Service Tax, Service tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and any other material statutory dues, to the extent applicable, have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees'' State Insurance, Income-tax, Sales-tax, Goods and Service Tax, Service tax, Duty of Customs, Duty of Excise, Value Added tax, Cess and other material statutory dues, to the extent applicable, were in arrears as at 31 March 2018 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, and on the basis of the records of the Company examined by us, there are no dues outstanding of Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise and Value Added Tax which has not been deposited as on 31 March 2018 on account of disputes, except as mentioned below:-

Name of the Statute	Nature of the dues #	Amount (net of paid) ('' in Crore)	Forum where dispute is pending	Period to which amount relates
Himachal Pradesh Tax on Entry of Goods into Local Area Act, 2010	Entry tax	5.43	High Court of Himachal Pradesh	2011 -2017
Gujarat Tax on Entry of specified goods into Local Areas Act, 2001		14.60	Supreme Court	2006-2017
The Central Excise Act, 1944	Excise duty	0.24	Supreme Court	1995-1996
		0.08	Commissioner Appeals	2012-13
		3.42	Joint Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi	2014-15
The Central Excise Act, 1944	Excise duty	0.07	High Court of Jammu	2004-05
		1.28	Joint Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi	2008-12
		0.04	Regional Authority, Jammu	2010
		1.50	Commissioner (Appeals)	2011-2016
		0.07	Additional Commissioner	2012-13
		0.53	Central Excise & Service Tax Appellate Tribunal, New Delhi	2010-11

# including interest/ penalties, where quantified and demanded by authorities.

(viii) According to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to any banks. The Company did not have any outstanding debentures or dues on account of loans or borrowings to any financial institutions or government during the year.

(ix) According to the information and explanations given to us, the Company did not raise any money by way of initial public offer or further public offer (including debt instrument) during the year. Further, the term loans taken by the Company have been applied for the purpose for which they were raised.

(x) According to the information and explanations given to us, no fraud by the Company or on the

Company by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations given to us and based on our examination of the records of the Company, the managerial remuneration has been paid or provided by the Company in accordance with provisions of Section 197 read with Schedule V of the Companies Act, 2013.

(xii) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and on the basis of our examination of

the records of the Company, all transactions with the related parties are in compliance with section 177 and 188 of the Act, where applicable, and the details have been disclosed in the standalone Ind AS financial statements, as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of its shares or fully or partly convertible debentures during the year. Accordingly, paragraph 3(xiv) of the Order is not applicable.

(xv) According to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) According to the information and explanations given to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Report on the Internal Financial Controls under Clause (i) of Sub-section (3) of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls with reference to financial statements of Sutlej Textiles and Industries Limited ("the Company") as of 31 March 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control with respect to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on ''Audit of Internal Financial Controls over Financial Reporting'' issued by the

Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditor''s Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls with respect to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on ''Audit of Internal Financial Controls Over Financial Reporting'' (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with respect to financial statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with respect to financial statements and their operating effectiveness. Our audit of internal financial controls with respect to financial statements included obtaining an understanding of internal financial controls with respect to financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system with respect to financial statements.

Meaning of Internal Financial Controls with respect to financial statements

A company''s internal financial control with respect to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial statements and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control with respect to financial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with respect to financial statements

Because of the inherent limitations of internal financial controls with respect to financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with respect to financial statements to future periods are subject to the risk that the internal financial control with respect to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system with respect to financial statements and such internal financial controls with respect to financial statements were operating effectively as at 31 March 2018, based on the internal control with respect to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI.

For B S R & Co. LLP

Chartered Accountants ICAI

Firm registration number: 101248W/W-100022

Rajiv Goyal

Place : Gurugram Partner

Date : 11 May 2018 Membership No.: 094549

---

Mar 31, 2017

TO THE MEMBERS OF

SUTLEJ TEXTILES AND INDUSTRIES LIMITED

Report on the Ind AS Financial Statements

We have audited the accompanying Ind AS financial statements of SUTLEJ TEXTILES AND INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Profit and Loss, the Cash Flow Statement, and a summary of the significant accounting policies and other explanatory information for the year ended, in which are incorporated the financial statements for the year ended on that date audited by the branch auditor of the Company''s unit at Kathua in the State of Jammu and Kashmir and Baddi in the State of Himachal Pradesh.

Management''s Responsibility for the Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Indian Accounting Standards) Rules 2015 as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these Ind AS financial statements based on our audit .We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the Ind As financial statements

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2017, and its profit and its cash flows for the year ended on that date.

Other Matter

We did not audit the financial statements of Kathua and Baddi Units included in the financial statements of the Company whose financial statements reflect total assets of Rs.1094.91 crores as at 31st March, 2017 and total revenues of Rs.1612.71 crores for the year ended on that date, as considered in the financial statements. The financial statements of the Kathua and Baddi units have been audited by the branch auditor whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of the branches, is based solely on the report of branch auditor. Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order ,2016 (''the Order ''),issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act,2013 we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us

(c) The reports on the accounts of the Kathua and Baddi units of the Company audited under Section 143 (8) of the Act by branch auditor have been sent to us and have been properly dealt with by us in preparing this report.

(d) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the financial statements received from the Kathua and Baddi units not visited by us.

(e) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Indian Accounting Standards) Rules, 2015 as amended.

(f) On the basis of the written representations received from the directors as on 31st March, 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2017 from being appointed as a director in terms of Section 164 (2) of the Act.

(g) With respect to the adequacy of the internal financial control over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 39 A and B to the financial statements

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, on long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company

iv. The Company has provided requisite disclosures in Note No. 45 to these Ind AS financial statements as to holding of Specified Bank Notes on November 8, 2016 and December 30, 2016 as well as dealing in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016. Based on our audit procedures and relying on the management representation regarding the holding and nature of cash transactions, including Specified Bank Notes, we report that these disclosures are in accordance with the books of accounts maintained by company as produced to us and as per audit report received from branch auditors.

Annexure A

Annexure referred to in paragraph 1 of our report of even date on the other legal and regulatory requirements (Re: Sutlej Textiles and Industries Limited)

(i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets have been physically verified by the management at reasonable interval except in Bhilad unit, where major fixed assets have been physically verified by the management during the year as per regular programme of verification. No material discrepancies were noticed on such verification

c. According to information and explanations given by the management, the title deeds of immovable properties included in fixed assets, except few assets having aggregate gross value of Rs.3 crores (WDV as on 31st March, 2017 Rs.2.68 crores) for which registration is pending, are held in the name of the respective units.

(ii) As explained to us, inventories (except stock lying with third parties) were physically verified during the year by the management at reasonable intervals and no material discrepancies were noticed on such physical verification.

(iii) The Company has granted unsecured loan to a company covered in the register maintained under Section 189 of the Companies Act, 2013. The terms and conditions of the grant of such loan is not prejudicial to the interest of the Company. The Company has stipulated schedule of repayment of principal and payment of interest and repayment of the principal amount and receipt of interest are regular. The Company has not granted any loan to firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(iv) The Company has complied with provisions of section 186 of the Companies Act, 2013 in respect of loan granted and Investments made .According to information and explanations given by the management, no loan or guarantee or security under section 185 and no guarantee and security under section 186 of the Companies Act,2013 have given during the year.

(v) The company has not received any deposit covered under section 76 of the Companies Act,2013 during the year. Therefore, provisions of clause 3(v) of the order are not applicable to the company.

(vi) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1)of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) a. According to the records of the Company, the

Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-tax, Sales-tax, Service tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other material statutory dues deducted/accrued in the books, with the appropriate authorities. There was no undisputed outstanding statutory dues as at the yearend for a period of more than six months from the date they became payable.

b. According to the records of the Company, there are no dues outstanding of Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise and Value Added Tax on account of any dispute, other than the followings:

Name of Statute	Nature of Dues	Amount (net of paid) (Rs. in crores	Forum where Dispute is Pending	Related Period
The Central Excise Act, 1944	Disallowances & Penalty and interest on payment of service tax through Cenvat	0.36	Commissioner (Appeals), Jaipur	Oct., 05 to Mar., 06
The Central Excise Act, 1944	Demand & Penalty for Service Tax	0.03	Commissioner (Appeals), Jaipur	Dec.,05 to Oct.,06

The Central Excise Act, 1944	Penalty against nonreversal of Cenvat credit on exempted goods	0.09	Rajasthan High Court, Jaipur	May,99 to Feb.,2002
The Central Excise Act, 1944	Demand of rebate erroneously granted and paid by department	0.53	Central Excise & Service Tax Appellate Tribunal, New Delhi	2010-11
The Central Excise Act, 1944	Demand of rebate erroneously granted and paid by Department	1.28	Joint Secretary, Government of India, Ministry of finance, Department of Revenue New Delhi	2008-2012
The Central Excise Act, 1944	Excise duty on Clearance of Yarn at Single Stage	0.24	High Court of Jammu and Kashmir, Jammu	1995 - 1996
The Central Excise Act, 1944	Excise Duty on Clearance of Capital goods and Scrap Sales, interest and penalty thereon	0.08	CESTAT, New Delhi	2009-2012
The Central Excise Act, 1944	Demand of rebate erroneously granted and paid by Department	3.70	Joint Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi	2014-15
Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001	Entry Tax, Penalty and Interest thereon	13.09	Commercial Tax Officer, Vapi	Apr., 06 to Mar., 17
Himachal Pradesh Tax on Entry of Goods into Local Area Act, 2010	Entry Tax on purchase of raw material	5.43	High Court of Himachal Pradesh	2010-11 to 2016-17
Rajasthan Tax on Entry of Goods into Local Areas Act, 1999	Entry Tax and Interest	0.41	Supreme Court, Delhi	Apr., 06 to Mar., 17

(viii) The Company has not defaulted in repayment of dues to banks. The Company did not have any outstanding loan from any financial institution, Government and dues to debenture holders.

(ix) According to the information and explanations given to us, the Company has not raised any monies by way of initial public offer or further public offer (including debt instruments). Further in our opinion and according to the explanations given to us, term loans were applied for the purpose for which loans were raised.

(x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given to us, we report that no fraud by the Company or no fraud on the Company by the officers and employees of the Company has been noticed or reported during the year .

(xi) According to the information and explanations given by the management, managerial remuneration has been paid /provided in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act, 2013 except commission Rs.7.20 crores payable to Chairman and other directors for which approval from shareholders are being taken in ensuing Annual General Meeting.

(xii) In our opinion, the Company is not a Nidhi company. Therefore, the provisions of clause 3(xii) of the order are not applicable to the Company.

(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given by the management, the Company has not made any preferential allotments or private placement of shares or fully or partly convertible debentures during the year under review. Therefore, the provisions of clause 3(xiv) of the order are not applicable.

(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with directors. Therefore, the provisions of clause 3(xv) of the order are not applicable.

(xvi) In our opinion, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Therefore, the provisions of clause 3 (xvi) of the order are not applicable.

Annexure B

Report on the Internal Financial controls under Clause (i) of Sub - section 3 of Section 143 of the Companies Act, 2013 (“the Act")

We have audited the internal financial controls over financial reporting of Sutlej Textiles and Industries Limited as of March 31, 2017 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over the financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditor''s Responsibility

Our responsibility is to express an opinion on the company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "guidance Note") and the standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the companies Act, 2013, to the extent applicable to as audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those standards and the Guidance Note require that we comply with ethical requirements of and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exist, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal; financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the company ; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of Internal Financial Controls Over Financial Reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2017, based on the internal control over the financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

For M/s SINGHI & CO.

Chartered Accountants

Firm''s Reg. No.302049E

B. K. Sipani

Place : Mumbai Partner

Date : 18th May, 2017 Membership No 088926

---

Mar 31, 2016

We have audited the accompanying financial statements of SUTLEJ
TEXTILES AND INDUSTRIES LIMITED ("the Company"), which comprise the
Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss,
the Cash Flow Statement, and a summary of the significant accounting
policies and other explanatory information for the year then ended, in
which are incorporated the financial statements for the year ended on
that date audited by the branch auditor of the Company''s unit at Kathua
in the State of Jammu and Kashmir and Baddi in the State of Himachal
Pradesh.

Management''s Responsibility for the Financial Statements The Company''s
Board of Directors is responsible for the matters stated in Section
134(5) of the Companies Act, 2013 ("the Act") with respect to the
preparation of these financial statements that give a true and fair
view of the financial position, financial performance and cash flows of
the Company in accordance with the accounting principles generally
accepted in India, including the Accounting Standards specified under
Section 133 of the Act, read with Rule 7 of the Companies (Accounts)
Rules, 2014. This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of the Act for
safeguarding the assets of the Company and for preventing and detecting
frauds and other irregularities; selection and application of
appropriate accounting policies; making judgments and estimates that
are reasonable and prudent; and design, implementation and maintenance
of adequate internal financial controls, that were operating
effectively for ensuring the accuracy and completeness of the
accounting records, relevant to the preparation and presentation of the
financial statements that give a true and fair view and are free from
material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial
statements based on our audit .We have taken into account the
provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the
provisions of the Act and the Rules made there under. We conducted our
audit in accordance with the Standards on Auditing specified under
Section 143(10) of the Act. Those Standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.

An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor''s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal financial control relevant to the Company''s
preparation of the financial statements that give a true and fair view
in order to design audit procedures that are appropriate in the
circumstances, An audit also includes evaluating the appropriateness of
the accounting policies used and the reasonableness of the accounting
estimates made by the Company''s Directors, as well as evaluating the
overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the financial
statements.

Opinion

In our opinion and to the best of our information and according to the
explanations given to us, the aforesaid financial statements give the
information required by the Companies Act, 2013 in the manner so
required and give a true and fair view in conformity with the
accounting principles generally accepted in India, of the state of
affairs of the Company as at 31st March, 2016 , and its Profit and its
cash fows for the year ended on that date.

Other Matter

We did not audit the financial statements of Kathua and Baddi Units
included in the financial statements of the Company whose financial
statements reflect total assets of Rs.105262.85 lakhs as at 31st March,
2016 and total revenues of Rs.159807.05 lakhs for the year ended on
that date, as considered in the financial statements. The financial
statements of the Kathua and Baddi units have been audited by the
branch auditor whose reports have been furnished to us, and our opinion
in so far as it relates to the amounts and disclosures included in
respect of the branches, is based solely on the report of branch
auditor.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (''the
Order''), issued by the Central Government of India in terms of
sub-section (11) of section 143 of the Companies Act, 2013 we give in
the Annexure A, a statement on the matters specified in paragraphs 3
and 4 of the Order, to the extent applicable.

2. As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for the
purposes of our audit.

(b) In our opinion, proper books of account as required by law have
been kept by the Company so far as it appears from our examination of
those books and proper returns adequate for the purposes of our audit
have been received from branches not visited by us.

(c) The reports on the accounts of the Kathua and Baddi units of the
Company audited under Section 143 (8) of the Act by branch auditor have
been sent to us and have been properly dealt with by us in preparing
this report.

(d) The Balance Sheet, the Statement of Profit and Loss, and the Cash
Flow Statement dealt with by this Report are in agreement with the
books of account and with the financial statements received from the
Kathua and Baddi units not visited by us.

(e) In our opinion, the aforesaid financial statements comply with the
Accounting Standards specified under Section 133 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014.

(f ) On the basis of the written representations received from the
directors as on 31st March, 2016 taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March, 2016
from being appointed as a director in terms of Section 164 (2) of the
Act.

(g) With respect to the adequacy of the internal financial control over
financial reporting of the Company and the operating effectiveness of
such controls, refer to our separate Report in "Annexure B ".

(h) With respect to the other matters to be included in the Auditor''s
Report in accordance with Rule 11 of the Companies (Audit and Auditors)
Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its
financial position in its financial statements – Refer Note 7 and
18A(1&2) to the financial statements;

ii. The Company has made provision, as required under the applicable
law or accounting standards, for material foreseeable losses, on
long-term contracts including derivative contracts – Refer Note 20 to
the financial statements;

iii. There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the
Company.

(i) a. The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.

b. Fixed Assets have been physically verified by the management at
reasonable interval except in Bhilad unit, where major fixed assets
have been physically verified by the management during the year as per
regular programme of verification. No material discrepancies were
noticed on such verification.

c. According to information and explanations given by the management,
the title deeds of immovable properties included in fixed assets,
except immovable properties having original cost of Rs. 300.32 lakhs
(WDV as on 31st March, 2016 Rs. 271.65 lakhs) for which registration is
pending, are held in the name of the respective units. These title
deeds and possession letters have been given as security against the
term and other loans taken from banks and as informed to us the
original title deeds are kept with the lenders as security and
therefore same could not be made available for our verification.

(ii) As explained to us, inventories (except stock lying with third
parties ) were physically verified during the year by the management at
reasonable intervals during the year and no material discrepancies were
noticed on such physical verification.

(iii) The Company has granted unsecured loan to a company covered in
the register maintained under Section 189 of the Companies Act, 2013.
The terms and conditions of the grant of such loan is not prejudicial
to the interest of the Company. The Company has stipulated schedule of
repayment of principal and payment of interest and repayment of the
principal amount and receipt of interest are regular. The Company has
not granted any loan to firms, Limited Liability Partnerships or other
parties covered in the register maintained under section 189 of the
Companies Act, 2013.

(iv) The Company has complied with provisions of section 186 of the
Companies Act, 2013 in respect of loan granted and Investments made.
According to information and explanations given by the management, no
loan or guarantee or security under section 185 and no guarantee and
security under section 186 of the Companies Act, 2013 have given during
the year.

(v) The company has not received any deposit covered under section 76
of the Companies Act, 2013 during the year. Therefore, provisions of
clause 3(v) of the order are not applicable to the company.

(vi) We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules made by the Central Government for the
maintenance of cost records under section 148 (1)of the Companies Act,
2013 and are of the opinion that prima facie the prescribed accounts
and records have been made and maintained. We have not, however, made a
detailed examination of the same.

(vii) a. According to the records of the Company, the Company is
generally regular in depositing undisputed statutory dues including
Provident Fund, Employees'' State Insurance, Income-tax, Sales-tax,
Service tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and
other material statutory dues deducted/accrued in the books, with the
appropriate authorities. There was no undisputed outstanding statutory
dues as at the yearend for a period of more than six months from the
date they became payable.

b. According to the records of the Company, there are no dues
outstanding of Income Tax, Sales Tax, Service Tax, Duty of Customs,
Duty of Excise and Value Added Tax on account of any dispute, other
than the followings:

Name of
Statute Nature of Dues Amount Forum where Related Period
(net of
paid) Dispute is
Pending
(Rs. in
lakhs)

The Central
Excise Act,
1944 Disallowances
& Penalty and
interest on 36.05 Commissioner
(Appeals),
Jaipur Oct., 05 to
Mar., 06
payment of
service tax
through Cenvat

The Central
Excise Act,
1944 Demand &
Penalty for
Service Tax 23.91 CESTAT,
New Delhi Dec.,05 to
Oct.,06

The Central
Excise Act,
1944 Penalty
against non-
reversal of
Cenvat 8.50 Rajasthan
High Court,
Jaipur May,99 to
Feb.,2002
credit on
exempted
goods
Rajasthan
Tax on
Entry of
Goods Entry Tax
and Interest 34.59 Supreme
Court, Delhi Apr., 06 to
Mar., 16
into
Local
Areas
Act,1999

Rajasthan
Electri
city (Duty)
Act, Demand of
Urban Cess
on purchase
of 258.30 Rajasthan
High Court,
Jaipur Apr 2010 to
Mar 16

1962 electricity

The Central
Excise
Act, 1944 Demand of
rebate
erroneously
granted 138.35 Additional
Commissioner
of 2008-2012
and paid by
Department Central
Excise,
Jammu

The Central
Excise Act,
1944 Demand
towards
Excise duty
on Textile 17.64 CESTAT,
New Delhi 2000– 2005
Committee
Cess

The Central
Excise Act,
1944 Excise duty
on Clea
rance of
Yarn at 23.66 High Court
of Jammu and 1995 – 1996
Single
Stage Kashmir,
Jammu

The Central
Excise Act,
1944 Excise
Duty on
Clearance
of Capital 22.40 CESTAT, New
Delhi 2009-2012
goods and
Scrap Sales,
interest
and
penalty
thereon

The Central
Excise Act,
1944 Demand of
rebate
erroneously
granted 365.01 Commissioner
of Central
Excise 2014-15
and paid by
Department (Appeals),
Chandigarh

Gujarat
Tax on
Entry of
Specified Entry Tax,
Penalty
and Inte
rest
thereon 1213.11 Commercial
Tax Officer,
Vapi Apr, 06 to
Mar, 16

Goods
into Local
Areas Act,
2001

Himachal
Pradesh
Tax on
Entry Entry
Tax on
purchase
of raw
material 508.29 High Court
of Himachal
Pradesh 2010-11 to 2015-16

of Goods
into Local
Area Act,
2010

The Central
Excise Act,
1944 Demand
towards
excise
duty on
textiles 52.52 Central
Excise &
Service Tax 2010-11

committee
cess Appellate
Tribunal,
New Delhi

(viii) The Company has not defaulted in repayment of dues to banks. The
Company did not have any outstanding loan from any financial
institution , Government and dues to debenture holders .

(ix) According to the information and explanations given to us, the
Company has not raised any monies by way of initial public offer or
further public offer (including debt instruments). Further in our
opinion and according to the explanations given to us, term loans were
applied for the purpose for which loans were raised.

(x) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and
according to the information and explanations given to us, we report
that no fraud by the Company or no fraud on the Company by the offers
and employees of the Company has been noticed or reported during the
year .

(xi) According to the information and explanations given by the
management, managerial remuneration has been paid / provided in
accordance with the requisite approvals mandated by the provisions of
section 197 read with schedule V to the Companies Act, 2013 except
commission Rs. 495 lakhs payable to Chairman and other directors for
which approval from shareholders are being taken in ensuing Annual
General Meeting.

(xii) In our opinion, the Company is not a Nidhi company. Therefore,
the provisions of clause 3(xii) of the order are not applicable to the
Company.

(xiii) According to the information and explanations given by the
management, transactions with the related parties are in compliance
with section 177 and 188 of the Companies Act, 2013 where applicable
and the details have been disclosed in the Financial Statements as
required by the applicable accounting standards.

(xiv) According to the information and explanations given by the
management, the Company has not made any preferential allotments or
private placement of shares or fully or partly convertible debentures
during the year under review.. Therefore, the provisions of clause
3(xiv) of the order are not applicable.

(xv) According to the information and explanations given by the
management, the Company has not entered into any non- cash transactions
with directors or persons connected with directors. Therefore, the
provisions of clause 3(xv) of the order are not applicable.

(xvi) In our opinion, the Company is not required to be registered
under section 45-IA of the Reserve Bank of India Act, 1934. Therefore,
the provisions of clause 3 (xvi) of the order are not applicable.

Report on the Internal Financial controls under Clause (i) of Sub -
section 3 of Section 143 of the Companies Act, 2013 ("the Act") We have
audited the internal financial controls over financial reporting of
Sutlej Textiles and Industries Limited as of March 31, 2016 in
conjunction with our audit of the financial statements of the Company
for the year ended on that date.

Management''s Responsibility for Internal Financial Controls The
Company''s management is responsible for establishing and maintaining
internal financial controls based on the internal control over the
financial reporting criteria established by the company considering the
essential components of internal control stated in the Guidance Note on
Audit of Internal Financial Controls over Financial Reporting issued by
the Institute of Chartered Accountants of India. These responsibilities
include the design, implementation and maintenance of adequate internal
financial controls that were operating effectively for ensuring the
orderly and efficient conduct of its business, including adherence to
company''s policies, the safeguarding of its assets, the prevention and
detection of frauds and errors, the accuracy and completeness of the
accounting records, and the timely preparation of reliable financial
information, as required under the Companies Act, 2013.

Auditor''s Responsibility

Our responsibility is to express an opinion on the company''s internal
financial controls over financial reporting based on our audit. We
conducted our audit in accordance with the Guidance Note on Audit of
Internal Financial Controls Over Financial Reporting (the "guidance
Note") and the standards on Auditing, issued by ICAI and deemed to be
prescribed under section 143(10) of the companies Act, 2013, to the
extent applicable to an audit of internal financial controls, both
applicable to an audit of Internal Financial Controls and, both issued
by the Institute of Chartered Accountants of India. Those standards
and the Guidance Note require that we comply with ethical requirements
of and plan and perform the audit to obtain reasonable assurance about
whether adequate internal financial controls over financial reporting
was established and maintained and if such controls operated
effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about
the adequacy of the internal financial controls system over financial
reporting and their operating effectiveness. Our audit of internal
financial controls over financial reporting included obtaining an
understanding of internal financial controls over financial reporting,
assessing the risk that a material weakness exist, and testing and
evaluating the design and operating effectiveness of internal control
based on the assessed risk. The procedures selected depend on the
auditor''s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or
error.

We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the Company''s
internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting A
Company''s internal financial control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. A company''s internal financial control over
financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being
made only in accordance with authorization of management and directors
of the company ; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or
disposition of the company''s assets that could have a material effect
on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial
Reporting

Because of the inherent limitations of Internal Financial Controls Over
Financial Reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or
fraud may occur and not be detected. Also, projections of any
evaluation of the internal financial controls over financial reporting
to future periods are subject to the risk that the internal financial
controls over financial reporting may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate
internal financial controls system over financial reporting and such
internal financial controls over financial reporting were operating
effectively as at March 31, 2016, based on the internal control over
the financial reporting criteria established by the company considering
the essential components of internal control stated in the Guidance
Note on Audit of Internal Financial Controls over Financial Reporting
issued by the Institute of Chartered Accountants of India.

For SINGHI & CO.

Chartered Accountants

Firm''s Reg. No.302049E

B. K. Sipani

Place : New Delhi Partner

Date : 11th May,2016 Membership No. 088926

---

Mar 31, 2015

We have audited the accompanying financial statements of SUTLEJ TEXTILES AND INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement, and a summary of the significant accounting policies and other explanatory information for the year then ended, in which are incorporated the financial statements for the year ended on that date audited by the branch auditor of the Company's unit at Kathua in the State of Jammu and Kashmir.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error, In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2015, and its profit and its cash flows for the year ended on that date.

Other Matter

We did not audit the financial statement of Kathua unit included in the financial statements of the Company whose financial statements reflect total assets of Rs. 78884.55 lakhs as at 31st March, 2015 and total revenues of Rs. 120727.91 lakhs for the year ended on that date, as considered in the financial statements. The financial statement of the branch has been audited by the branch auditor whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of the branch, is based solely on the report of such branch auditor.

Our opinion is not modified in respect of this matter.

Report on the other legal and regulatory requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ('the Order'), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act,2013 we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143 (3) of the Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and as per report submitted by the branch auditor.

c. The report on the accounts of the Kathua unit of the Company audited under Section 143 (8) of the Act by branch auditor has been sent to us and have been properly dealt with by us in preparing this report.

d. The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the financial statements received from the Kathua unit not visited by us.

e. In our opinion. the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014

f. On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act

g. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements — Refer Note 7 and 19A (1) and (2) to the financial statements

ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company

Annexure referred to in paragraph I of our report of even date on the other legal and regulatory requirements (Re: Sutlej Textiles and Industries Limited)

(i) a. The Company has maintained proper records showing full

particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets of the Company's units at Bhawanimandi has been physically verified by the management during the year and in respect of Kathua and Bhilad units, all fixed assets have not been physically verified by the management during the year but there is a regular programme of verification. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

(ii) a. As explained to us inventories (except stock lying with third parties and in-transit) were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) The Company has granted loans to companies covered in the register maintained under Section 189 of the Companies Act, 2013 and receipt of the principal amount and interest are regular.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) The company has not received any deposit during the year. In case of deposit received in earlier years and were outstanding as on 31st March, 2014, the company has complied with the directives issued by the Reserve Bank of India and provisions of Section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and rules framed there under to the extent applicable, with regard to the deposits accepted from the public. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court, or any other Tribunal.

(vi) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) a. According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, service tax, wealth tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues applicable to it with the appropriate authorities. There was no undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they became payable. b. According to the records of the Company, there are no dues outstanding of income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax and cess on account of any dispute, other than the followings:

Name of the statute Nature of dues

The Central Excise Act, 1944 Disallowances & Penalty on Cenvat on Service Tax

The Central Excise Act, 1944 Demand & Penalty for Service Tax

The Central Excise Act, 1944 Penalty against non-reversal of Cenvat credit on exempted goods

The Central Excise Act, 1944 Demand of rebate erroneously granted and paid by Department

The Central Excise Act, 1944 Demand towards excise duty on Textile Committee cess

The Central Excise Act, 1944 Excise duty on Clearance of Yarn at Single Stage

The Central Excise Act, 1944 Excise Duty on Clearance of Capital goods and Scrap Sales, interest and penalty thereon

Gujarat Tax on Entry of Specified Entry Tax, Penalty and Interest Goods into Local Areas Act, 2001 thereon

Rajasthan Tax on Entry of Goods Entry Tax and Interest into Local Areas Act, 1999

Name of the statute Amount Forum where dispute (Rs. in is pending lakhs)

The Central Excise Act, 1944 36.05 Commissioner (Appeals), Jaipur

The Central Excise Act, 1944 23.91 CESTAT, New Delhi

The Central Excise Act, 1944 8.50 Rajasthan High Court, Jaipur

The Central Excise Act, 1944 138.35 Additional Commissioner of Central Excise, Jammu

The Central Excise Act, 1944 17.64 CESTAT, New Delhi

The Central Excise Act, 1944 23.66 High Court of Jammu and Kashmir, Jammu

The Central Excise Act, 1944 22.40 CESTAT, New Delhi



Gujarat Tax on Entry of Specified 1129.79 Commercial Tax Goods into Local Areas Act, 2001 Officer, Vapi

Rajasthan Tax on Entry of Goods 40.53 Supreme Court, into Local Areas Act, 1999 Delhi

Name of the statute Related period

The Central Excise Act, 1944 Oct., 05 to Mar., 06

The Central Excise Act, 1944 Dec., 05 to Oct.,06

The Central Excise Act, 1944 May, 99 to Feb.,02

The Central Excise Act, 1944 2008-2012

The Central Excise Act, 1944 2000- 2005

The Central Excise Act, 1944 1995 - 1996

The Central Excise Act, 1944 2009-2012

Gujarat Tax on Entry of Specified Apr, 06 to Mar, 15 Goods into Local Areas Act, 2001

Rajasthan Tax on Entry of Goods Apr, 06 to Mar, 15 into Local Areas Act, 1999

c. The amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act ,1956 (1 of 1956) and rules made there under have been transferred to such funds within time.

(viii) The Company has no accumulated losses at the end of the financial year and it has not incurred any cash loss in the current and immediately preceding financial year.

(ix) Based on our audit procedures and on the basis of information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to financial institutions and banks. The company has no outstanding debentures.

(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xi) According to the information and explanations given to us, term loans obtained were applied for the purpose for which loans were obtained.

(xii) Based on our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For SINGHI & Co. Chartered Accountants Firm Reg. No.302049E



B.K. Sipani Place: Mumbai Partner Date: 7th May, 2015 Membership No. 88926

---

Mar 31, 2014

We have audited the accompanying financial statements of Sutlej Textiles and Industries Limited, ("the company") which comprise the Balance Sheet as at 31st March, 2014 and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conduct our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the report of the other auditor on the financial statements of Chenab Textiles Mills as noted below, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2014;

b. In the case of Statement of Profit and Loss, of the profit for the year ended on that date; and

c. In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Other Matter

We did not audit the financial statements of Chenab Textile Mills, whose financial statements reflect total assets (net) of Rs.70026.05 lakhs as at 31st March,2014, total revenues(net) of Rs.115544.33 lakhs and net cash outflow amounting to Rs.115.51 lakhs for the year then ended. These financial statements have been audited by other auditor whose reports have been furnished to us, and our opinion is based solely on the report of the other auditor. Our opinion is not qualified in respect of this matter.

Report on the other legal and regulatory requirements

1. The report on the accounts of Chenab Textile Mills audited under section 228 of the Act by other auditor has been forwarded to us as required by clause(c) of sub-section 228 of the Act and have been dealt with in preparing our report in the manner considered necessary by us.

2. As required by the Companies (Auditor''s Report) order, 2003 ("the Order") issued by the Central Government of India in terms of sub- section (4A) of section 227 of the Act, we give in the Annexure a statements on the matters specified in the paragraphs 4 and 5 of the Order.

3. As required by section 227(3) of the Act, we report that,

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from depots not visited by us;

c. The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from depots not visited by us;

d. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the directors as on 31st March, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014, from being appointed as a director in terms of clause (g) of sub- section (1) of section 274 of the Companies Act, 1956.

Annexure referred to in paragraph 1 of our report of even date on the other legal and regulatory requirements (Re: Sutlej Textiles and Industries Limited)

(i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets of the Company''s units at Bhawanimandi has been physically verified by the management during the year and in respect of Kathua and Bhilad units, all fixed assets have not been physically verified by the management during the year but there is a regular programme of verification. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c. There was no substantial disposal of fixed assets during the year.

(ii) a. As explained to us inventories (except stock lying with third parties and in-transit) were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) a. The Company has granted loan to two bodies corporate covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.10950 lakhs and the year-end balance was nil.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c. Repayment of the principal amount is as stipulated and payment of interest has been regular.

d. As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly the provisions of clause 4 (iii) (f) and (g) of the Order are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories and fixed assets are of proprietary nature for which alternative sources are not available to obtain comparative quotations, there is an adequate internal control system commensurate with the size of the Company and the

nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) a. According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under to the extent applicable, with regard to the deposits accepted from the public. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court, or any other Tribunal.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) a. According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Sales-Tax, Service Tax, Wealth Tax, Custom duty, Excise duty, Cess and other statutory dues applicable to it with the appropriate authorities. There was no undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they became payable.

b. According to the records of the Company, there are no dues outstanding of Sales Tax, Income Tax, Service Tax, Custom Duty, Wealth Tax, Excise Duty and Cess on account of any dispute, other than the followings:

Name of the statute Nature of dues Amount (Rsin lakhs)

The Central Excise Act, 1944 Disallowances S Penalty on 36.05 Cenvat on Service Tax

The Central Excise Act, 1944 Demand S Penalty for Service Tax 23.91

The Central Excise Act, 1944 Penalty against non-reversal of 8.50 Cenvat credit on exempted goods

The Central Excise Act, 1944 Demand of rebate erroneously 138.35 granted and paid by Department

The Central Excise Act, 1944 Demand towards excise duty on 17.64 Textile Committee cess

The Central Excise Act, 1944 Excise duty on Clearance of Yarn 23.66 at Single Stage

The Central Excise Act, 1944 Excise Duty on Clearance of 22.40 Capital goods and Scrap Sales, interest and penalty thereon

Gujarat Tax on Entry of Entry Tax, Penalty and Interest 1051.95 Specified Goods into thereon Local Areas Act, 2001

Rajasthan Tax on Entry of Entry Tax and Interest 116.61 Goods into Local Areas Act, 1999

Name of the Statute Forum where dispute is Related period pending The Central Excise Act 1944 The Central Excise Act 1944 Commissioner (Appeals), Oct 05 to Jaipur Mar 06

The Central Excise Act 1944 Central Excise S Service Tax Dec 05 to Appellate Tribunal, New Delhi Oct 06

The Central Excise Act 1944 Rajasthan High Court, Jaipur May,99 to Feb 02 The Central Excise Act 1944 Additional Commissioner of 2008-2012 Central Excise, Jammu

The Central Excise Act 1944 Central Excise S Service Tax 2000- 2005 Appellate Tribunal, New Delhi

The Central Excise Act 1944 High Court of Jammu and 1995-1996 Kashmir, Jammu

The Central Excise Act 1944 Additional Commissioner 2009-2012 of Central Excise, Jammu S Kashmir

Gujarat Tax on entry of Commercial Tax Officer, Vapi Apr, 06 to Goodss into Local Areas Mar 14 Act - 2001 Rajasthan Tax on Entry of Rajasthan High Court,Jodhpur Apr, 06 to Goods Into Local Areas Mar 14 Act - 1999

x) The Company has no accumulated losses at the end of the financial year and it has not incurred any cash loss in the current and immediately preceding financial year.

(xi) Based on our audit procedures and on the basis of information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks. We have been informed that the Company did not have any debenture outstanding during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Accordingly, the clause 4 (xiii) of the Order is not applicable.

(xiv) The Company does not deal or trade in shares, securities, debentures and other securities except that it has investments in shares and units in mutual funds and these are held in the name of the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantees in favour of financial institution or bank for loans taken by others.

(xvi) According to the information and explanations given to us, term loans obtained during the year were applied for the purpose for which loans were obtained.

(xvii) According to the information and explanation given to us, on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year. Accordingly, clause 4 (xix) of the Order is not applicable.

(xx) The Company has not raised any money through a public issue during the year. Accordingly, clause 4 (xx) of the Order is not applicable.

(xxi) Based on our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

ForSINGHI SCO. Chartered Accountants Firm Reg. No.302049E B.K. Sipani Camp: Mumbai Partner Date: 13th May, 2014 Membership No. 88926

---

Mar 31, 2013

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of Sutlej Textiles and Industries Limited ("the company"), which comprise the Balance Sheet as at 31st March, 2013 and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

MANAGEMENT''S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows ofthe Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 ofthe Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

AUDITOR''S RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conduct our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating to overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the report of the other auditor on the financial statements of Chenab Textile Mills as noted below, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2013;

b. In the case of Statement of Profit and Loss, of the profit for the year ended on that date; and

c. In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

OTHER MATTER

We did not audit the financial statements of Chenab Textile Mills, whose financial statements reflect total assets (net) of Rs. 57812.06 lakhs as at 31st March,2013, total revenues(net) of Rs. 104986.54 lakhs and net cash inflow amounting to Rs. 94.28 lakhs for the year then ended. These financial statements have been audited by other auditor whose reports have been furnished to us and our opinion is based solely on the report of the other auditor. Our opinion is not qualified in respect of this matter.

REPORT ON THE OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the companies ( Auditor''s Report) order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statements on the matters specified in the paragraphs 4 and 5 of the Order.

2. As required by section 227(3) ofthe Act, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from depots not visited by us;

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from depots not visited by us;

d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and

e. On the basis of written representations received from the directors as on 31st March, 2013 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the companies Act, 1956.

(i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets of the Company''s units at Bhawanimandi and Daheli (Near Bhilad) have been physically verified by the management during the year and in respect of Chenab Textiles Mills , all fixed assets have not been physically verified by the management during the year but there is a regular programme of verification. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c. There was no substantial disposal of fixed assets during the year.

(ii) a. As explained to us inventories (except stock lying with third parties and in-transit) were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) a. The Company has granted loan to three bodies corporate covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 8500 lakhs and the year-end balance was nil.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c. In respect of loans granted, repayment of the principal amount is as stipulated and payment of interest have been regular.

d. As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (f) and (g) of the Order are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) a. According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under to the extent applicable, with regard to the deposits accepted from the public. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court, or any other Tribunal.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(l)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

(ix) a. According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Sales-Tax, Service Tax, Wealth Tax, Custom duty, Excise duty, Cess and other statutory dues applicable to it with the appropriate authorities. There was no undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they became payable.

b. Accordingto the records of the Company, there are no dues outstanding of Sales Tax, Income Tax, Service Tax, Custom Duty, Wealth Tax, Excise Duty and Cess on account of any dispute, other than the followings:

Amount Forum where dispute is Name of the atatute Nature of dues Related period (Rs. in lakhs) pending

Central Excise Act, 1944 Disallowances & Penalty on 36.05 Commissioner (Appeals) Jaipur Oct., 05 to Mar., 06 Cenvat on Service Tax

Central Excise Act, 1944 Demand & Penalty for Service 23.91 CESTAT, New Delhi Dec.,05 to Oct.,06 Tax

Central Excise Act, 1944 Penalty against non-reversal 8.50 Rajasthan High Court Jaipur May,99 to Feb.,2002 of cenvat credit on exempted goods

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred any cash loss in the current and immediately preceding financial year.

(xi) Based on our audit procedures and on the basis of information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks. We have been informed that the Company did not have any debenture outstanding during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Accordingly, clause 4 (xiii) of the Order is not applicable.

(xiv) The Company does not deal or trade in shares, securities, debentures and other securities except that it has investments in shares and units in mutual funds and these are held in the name of the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantees in favour of financial institution or bank for loans taken by others.

(xvi) According to the information and explanations given to us, term loans obtained during the year were applied for the purpose for which loans were obtained.

(xvii) According to the information and explanation given to us, on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year. Accordingly, clause 4 (xix) of the Order is not applicable.

(xx) The Company has not raised any money through a public issue during the year. Accordingly, clause 4 (xx) of the Order is not applicable

(xxi) Based on our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Singhi & Co.

Chartered Accountants

Firm Reg. No.302049E

B.K. Sipani

Camp: Mumbai Partner

Date: 8th May, 2013 Membership No. 88926

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of SUTLEJ TEXTILES AND INDUSTRIES LIMITED (the Company) as at March 31, 2012 and also the Profit and Loss Statement and the Cash Flow Statement for the year ended on that date annexed thereto in which financial statements of Chenab Textile Mills, Kathua Unit of the Company audited by Branch auditors are incorporated. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating, the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purpose of our audit, have been received from the branches/depots not visited by us. The report on the account of Chenab Textile Mills, Kathua Unit audited by Branch auditors has been forwarded to us and has been appropriately dealt by us in preparing our report;

iii. The Balance Sheet, Profit and Loss Statement and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the returns from the depots and the returns from the Chenab Textile Mills, Kathua Unit audited by Branch Auditors.

iv. In our opinion, the Balance Sheet, Profit and Loss Statement and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v. On the basis of written representations received from the directors as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2012, from being appointed as directors in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2012.

b) In the case of the Profit and Loss Statement, of the profit of the Company for the year ended on that date and

c) In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

(i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets of the Company's units at Bhawanimandi and Daheli (Near Bhilad) have been physically verified by the Management during the year and in respect of Kathua unit, all fixed assets have not been physically verified by the management during the year but there is a regular programme of verification. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c. There was no substantial disposal of fixed assets during the year.

(ii) a. As explained to us inventories (except stock lying with third parties and in-transit) were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification, wherever done.

(iii) a. The Company has granted loan to two Bodies Corporates covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 7000 lakhs and the year-end balance of loans granted to such parties was nil.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c. In respect of loans granted, repayment of the principal amount is as stipulated and payment of interest have been regular.

d. As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4 (iii) (f) and (g) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in internal control system.

(v) a. According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under to the extent applicable, with regard to the deposits accepted from the public. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

(ix) a. According to the records of the Company, the Company is generally regular in depositing material undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, service tax, wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it with the appropriate authorities. There was no material undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they became payable.

b. According to the records of the Company, there are no dues outstanding of sales tax, income tax, service tax, custom duty, wealth tax, excise duty and cess on account of any dispute, other than the following:

Name of Statute Nature of Dues Amount Forum where Dispute Related Period (Rs. in lakhs) is Pending

Central Excise Act, 1944 Disallowances & Penalty on Cenvat on 33.80 Commissioner Oct., 05 to Mar., Service Tax (Appeals), Jaipur 06

Central Excise Act, 1944 Demand & Penalty for Service Tax 23.91 CESTAT, New Delhi Dec.,05 to Oct.,06

Central Excise Act, 1944 Reversal of Cenvat Credit, Interest & 20.64 Rajasthan High Court, May,99 to Penalty on Excise Duty Jaipur Feb.,2002

Rajasthan Tax on Entry Entry Tax and Interest 99.31 Rajasthan High Court, April, 06 to March, of Goods into Local Jodhpur 12 Areas Act, 1999

Central Excise Act, 1944 Excise duty on Textile Committee Cess 17.64 Central Excise & Service 2000- 2005 and penalty thereon Tax Appellate Tribunal, New Delhi

Central Excise Act, 1944 Excise duty on Clearance of Yarn at 23.66 Central Excise & Service 1995 - 1996 Single Stage Tax Appellate Tribunal, New Delhi

Gujarat Tax on Entry Entry Tax, Penalty and Interest thereon 761.05 Commercial Tax Officer, Apr' 06 to Mar'12 of Specified Goods into Vapi Local Areas Act, 2001

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred any cash loss in the current and immediately preceding financial year.

(xi) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks. We have been informed that the Company has not issued any debenture during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditor's Report) Order,2003 (as amended), are not applicable to the Company.

(xiv) The Company does not deal or trade in shares, securities, debentures and other securities except that it has investments in shares / units of mutual funds and these are held in the name of the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantees in favour of financial institution or bank for loans taken by others.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed during the year by the Company were, prima facie, applied by the Company for the purpose for which loans were obtained.

(xvii) According to the information and explanation given to us, on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment by the Company.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based on our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Singhi & Co.

Chartered Accountants

Firm Reg. No. 302049E

B.K.Sipani

Place: New Delhi Partner

Dated: May 16, 2012 Membership No. 88926

---

Mar 31, 2011

1. We have audited the attached Balance Sheet of SUTLEJ TEXTILES AND INDUSTRIES LIMITED, as at 31st March, 2011 and also the Profit and Loss account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating, the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purpose of our audit, have been received from the branches/depots not visited by us. The report on the account of branch audited by other auditor has been forwarded to us and has been appropriately dealt by us in preparing our report;

iii. The Balance Sheet, Profit and Loss account and Cash Flow statement dealt with by this report are in agreement with the books of account and with the returns from the branches/depots;

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v. On the basis of written representations received from the directors as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2011, from being appointed as directors in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011.

b) In the case of the Profit and Loss account, of the profit of the Company for the year ended on that date and

c) In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Annexure referred to in paragraph 3 of our report of even date to the shareholders

(i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets of the Companys units at Bhawanimandi and Daheli (Near Bhilad) have been physically verified by the Management during the year and in respect of Kathua unit, the Unit is carrying out physical verification of fixed assets by covering physical verification of all fixed assets over a period of three years, accordingly part of fixed assets have been physically verified by the management during the year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c. There was no substantial disposal of fixed assets during the year.

(ii) a. As explained to us inventories (except stock lying with third parties, confirmation for which has been obtained and in-transit) were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification, wherever done.

(iii) a. The Company has granted loan to two Bodies Corporates covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 4500 lakhs and the year- end balance of loans granted to such parties was nil.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c. In respect of loans granted, repayment of the principal amount is as stipulated and payment of interest have been regular.

d. As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4 (iii) (f) and (g) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in internal control system.

(v) a. According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA of the Companies Act, 1956 and rules framed there under with regard to the deposits accepted from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

(ix) a. According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, services tax, wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it with the appropriate authorities. There was no undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they became payable.

b. According to the records of the Company, there are no dues outstanding of sales tax, income tax, service tax, custom duty, wealth tax, excise duty and cess on account of any dispute, other than the following:

Name of Statute Nature of Dues Amount Forum where Related Period (Rs. in lakhs) Dispute is Pending

(A) Bhawanimandi unit

Central Excise Act, 1944 Penalty on Serv ice Tax on GTA 13.17 CESTAT, New Delhi Jan.,05 to Sept., 05

Central Excise Act, 1944 Disallowance & Penalty for 33.80 Commissioner (Appeals) Oct., 05 to Mar., 06 Cenvat on Service Tax

Central Excise Act, 1944 Demand & Penalty for Service Tax 23.91 CESTAT, New Delhi Dec.,05 to Oct.,06

Central Excise Act, 1944 Reversal of Cen vat Credit, Interest & 25.50 Rajasthan High Court, Jaipur May,99 to Feb.,2002 Penalty on Excise Duty

Rajasthan Tax on Entry of Goods Entry Tax and Interest 91.37 Rajasthan High Court, Apr 06 to Mar 11 into Local Areas Act, 1999 Jodhpur

(B) Kathua Unit

Central Excise Act, 1944 Excise duty on Textile Committee 17.64 Central Excise & Service Tax 2000-2005 Cess and penalty thereon Appellate Tribunal, New Delhi

Central Excise Act, 1944 Excise duty on Clearance of 23.66 Central Excise & Service Tax 1995-1996 Yarn at Single Stage Appellate Trib unal, New Delhi

(C) Daheli unit

Gujarat Tax on Entry of Specified Entry Tax, Penalty and 626.04 Commercial Tax Officer Apr 06 to Mar11 Goods into Local Areas Act, 2001 Interest thereon

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred any cash loss in the current year.

(xi) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks. We have been informed that the Company has not issued any debenture during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society, therefore, the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order,2003 (as amended), are not applicable to the Company.

(xiv) The Company does not deal or trade in shares, securities, debentures and other securities except that it has investments in shares / units and these are held in the name of the Company.

(xv) According to the information and explanations given to us, the Company has not given any corporate guarantees in favour of financial institution/bank for loans taken by others.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which loans were obtained.

(xvii) According to the information and explanation given to us, on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment by the Company.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based on our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India and according to the information and explanations given to us, no fraud on or by the Company, noticed or reported during the year.



For Singhi & Co. Chartered Accountants Firm Reg. No. 302049E

B. K. Sipani Place: New Delhi Partner

Dated: May 13, 2011 Membership No. 88926

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of SUTLEJ TEXTILES AND INDUSTRIES LIMITED, as at March 31, 2010 and also the Profit and Loss account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating, the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purpose of our audit, have been received from the branches/depots not visited by us. The report on the account of branch audited by other auditor has been forwarded to us and has been appropriately dealt by us in preparing our report;

iii. The Balance Sheet, Profit and Loss account and Cash Flow statement dealt with by this report are in agreement with the books of account and with the returns from the branches/depots;

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v. On the basis of written representations received from the directors as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2010, from being appointed as directors in terms of clause (g) of Sub-section (1) of Section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010.

b) In the case of the Profit and Loss account, of the profit of the Company for the year ended on that date and

c) In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date. Annexure referred to in paragraph 3 of our report of even date to the shareholders

(i) a. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b. Fixed Assets of the Company’s units at Bhawanimandi and Daheli (Near Bhilad) have been physically verified by the Management during the year and in respect of Kathua unit, the Unit is carrying out physical verification of fixed assets by covering physical verification of all fixed assets over a period of three years, accordingly part of fixed assets have been physically verified by the management during the year. In our opinion, the frequency of physical verification is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification.

c. There was no substantial disposal of fixed assets during the year.

(ii) a. As explained to us inventories (except stock lying with third parties, confirmation for which has been obtained and in-transit) were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. In our opinion and according to the information and explanation given to us, the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification, wherever done.

(iii) a. The Company has granted loan to two Bodies Corporates covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 3000 lacs and the year- end balance of loans granted to such parties was nil.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c. In respect of loans granted, repayment of the principal amount is as stipulated and payment of interest have been regular.

d. As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4 (iii) (f) and (g) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in internal control system.

(v) a. According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under Section 301 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA of the Companies Act, 1956 and rules framed there under with regard to the deposits accepted from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

(ix) a. According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales-tax, services tax, wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it with the appropriate authorities. There was no undisputed outstanding statutory dues as at the year end for a period of more than six months from the date they became payable.

b. According to the records of the Company, there are no dues outstanding of sales tax, income tax, service tax, custom duty, wealth tax, excise duty and cess on account of any dispute, other than the following:

Name of Statute Nature of Dues Amount (Rs. in lakhs)

(A) Bhawanimandi unit Custom Act, 1962 Custom classification and 10.84 applicable rate of custom duty

Central Excise Act, 1944 Penalty on Service Tax on GTA 13.17

Central Excise Act, 1944 Disallowance & Penalty for 33.80 Cenvat on Service Tax

Central Excise Act, 1944 Demand & Penalty for Service Tax 23.91

Rajasthan Tax on Entry of Goods Entry Tax* 91.85

into Local Areas Act, 1999

Rajasthan Value Added VAT/CST & interest thereon 71.76

Tax Act, 2003

(B) Kathua Unit

Central Excise Act, 1944 Excise duty on Textile Committee 17.64 Cess and penalty thereon

Central Excise Act, 1944 Excise duty on Clearance of 23.66 Yarn at Single Stage

(C) Daheli unit

Gujarat Tax on Entry of Specified Entry Tax 101.61 Goods into Local Areas Act, 2001

Name of Statute Forum where Related Period Dispute is Pending

(A) Bhawanimandi unit Kolkata High Court 1982-83 Custom Act, 1962

Central Excise Act, 1944 CESTAT, New Delhi Jan.,05 to Sept., 05 Central Excise Act, 1944 Commissioner (Appeals) Oct., 05 to Mar., 06

Rajasthan Tax on Entry of Rajasthan High Court, Apr’ 06 to Mar’ 10 Goods into Local Areas Act, 1999 Jodhpur

Rajasthan Value Added Deputy Commissioner Apr’ 07 to Mar’ 08 Tax Act, 2003 (Appeals), Kota

(B) Kathua Unit

Central Excise Act, 1944 Central Excise & 2000-2005 Service Tax Appellate Tribunal, New Delhi Central Excise Act, 1944 Central Excise & 1995-1996 Service Tax

Appellate Tribunal, New Delhi

(C) Daheli unit

Gujarat Tax on Entry of Commercial Tax Officer Apr’ 06 to Mar’ 09 Specified Goods into Local Areas Act, 2001

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred any cash loss in the current year.

(xi) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions and banks. We have been informed that the Company has not issued any debenture during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society, therefore, the provisions of clause 4 (xiii) of the Companies (Auditor’s Report) Order,2003 (as amended), are not applicable to the Company.

(xiv) The Company does not deal or trade in shares, securities, debentures and other securities except that it has investments in shares / units and these are held in the name of the Company.

(xv) According to the information and explanations given to us, the Company has not given any corporate guarantees in favour of financial institution/bank for loans taken by others.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which loans were obtained.

(xvii) According to the information and explanation given to us, on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment by the Company.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based on our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India and according to the information and explanations given to us, no fraud on or by the Company, noticed or reported during the year.

For Singhi & Co.

Chartered Accountants Firm Reg. No. 302049E



B. K. Sipani

Partner Membership No. 88926

Place: New Delhi Dated: May 14, 2010